You’re reading Entrepreneur India, an international franchise of Entrepreneur Media.
The Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), has reportedly issued their first joint statement on crypto on Tuesday which stated that they had concerns with the safety and soundness of bank business models that are highly concentrated in crypto.
“Risks such as fraud and scams, legal uncertainties, inaccurate or misleading representations and disclosures, and volatility are associated with crypto-assets and the participants and banking organizations should be aware of them,” the US regulators warned in the joint statement, as per the reports.
The statement has also mentioned the contagion risk within the crypto-asset sector, which may result from interconnections among certain crypto-asset participants as one of the concerns.
“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” the joint statement added.
It further highlighted that FTX was a high-profile crypto exchange and collapsed in November due to reported misappropriation of customer funds. On the backdrop of this, the US regulators in the joint statement said that, “”The agencies are supervising banking organizations that may be exposed to risks stemming from the crypto-asset sector and carefully reviewing any proposals from banking organizations to engage in activities that involve crypto-assets.”
As per earlier reports, Sam Bankman-Fried, CEO of cryptocurrency exchange FTX saw his fortune and confidence in his platform tumble after a CoinDesk article revealed that a company he also owned was heavily dependent on an asset without independent value, created panic from FTX customers and in the crypt world in general.
Signifying the recent failures of several large crypto-asset companies, the statement said agencies continue to take a careful and cautious approach related to current or proposed crypto-asset-related activities and exposures at each banking organization.
“Banking organizations should ensure appropriate risk management, including board oversight, policies, procedures, risk assessments, controls, gates and guardrails, and monitoring, to effectively identify and manage risks,” the statement warned.
Leave a Reply